Motorola reported bleak results for 1Q07. First quaterly loss since 2004, due to poor handset sales and average selling price decline, to $181m, compared with a profit of $686m in 1Q06. Handset sales were down 15% to $5.4bn in value and down 2% to 45m units in volume, while the operating loss was $231m (down from earnings of $700m). Total sales amounted to $9.4bn in 1Q07 (almost flat). Networks & Enterprise deivision reported sales of $3bn, up 20%, with operating income of $182m. Connected Home solutions posted $1bn in sales (+42%) and $142m in operating income. So what at stake? The only division doing wrong is the mobile handset division. The recent Motorola strategy of turning to profitabilty instead of addressing emerging markets with high volume and low-cost products has failed. Everything looks like if Motorola could not follow ASP declines in the low-cost segment and most of its current portfolio has not the flexibility to address the mid and high-end segment of the market. Many analysts think that the situation. Investors, however, were expecting worse results for the quarter, and the share rose nearly 2% after the announcement.
Motorola 2Q07 outlook for sales is almost flat qoq, and it expects gradual recovery in the mobile handset division in 2H07 with profit for the year.